Question

who benefits more from a subsify to an insilin buyer? accompany your written argument with a graph. does your result hold for the oxford covid-11 vaccine? why or why not?

hint - on jan 23,1922 , 14 yr old leonard thompson became the first person ti recieve an insulin injection as treatment for diabetes. just yesterday, oxford university announced its new study reveals oxfoed coronavirus vaccine produces strong immune respone

Answer 1

Insulin is having high inelastic demand. But it's not perfectly inelastic, because there are even other ways to reduce diabetes other than taking insulin like doing exercise. When a subsidy is given to insulin buyer, it will decrease price a lot for them.

Initial demand and supply curve intersects at point E. Both demand and supply of insulin are inelastic as it's hard to make and necessary for diabetic patient. As few substitutes are there, it won't have perfectly inelastic demand and supply. When subsidy is given to buyer of insulin, demand for it will get increased slightly. This push up price to P1 and supply curve expands and quantity increase to Q1. But when there is no subsidy given, the price of Q1 unit of insulin was P2. So perunit subsidy is E1F. Buyer gets more benefit as even though price is high, government pays huge some of subsidy to the buyer. Actually buyer is paying P2 price as rest is given as subsidy by the government.

It may not be a case for Oxford Covid 11 vaccine. Because it may have perfectly inelastic demand and supply if it's testing is successful as there is no legal substitutes for it till date. When government give subsidy to it, it will be very helpful for the buyers as they can enjoy the entire subsidy. More number of buyers will be added. Demand from other countries for this vaccine may get increased.

In the case of insulin, more benefit will be enjoyed by buyers when subsidy is given to them. In the case of Oxford COVID vaccine, the entire benefit of subsidy can be enjoyed by the buyer.